CCI on Hospital Room Rent, In‑House Pharmacy Pricing & Abuse of Dominance: Key Takeaways from Vivek Sharma Vs Max Super Specialty Hospital

1. Background and Origin of the Case

Information under Section 19(1)(a) of the Competition Act, 2002 was filed by Shri Vivek Sharma against Becton Dickinson India (P) Ltd. and Max Super Specialty Hospital, Patparganj, Delhi (Max Patparganj).

The core allegation:

  • Becton Dickinson India (P) Ltd., a manufacturer of disposable syringes,
  • allegedly acted in concert with Max Patparganj,
  • by printing a higher Maximum Retail Price (MRP) on syringes sold via the hospital’s in‑house pharmacy,
  • as compared to the same syringes made available in the open market.

The Commission, after preliminary hearing, formed a prima facie view that there might be contravention of Section 4 of the Competition Act and, by order dated 17.11.2015 under Section 26(1), directed the Director General (DG) to investigate.

The DG submitted a confidential and a public version of the main investigation report. The Commission circulated the public version to the Informant, Becton Dickinson India (P) Ltd., Max Patparganj and four individuals identified under Section 48, asking them to file objections/suggestions. Balance sheets, profit and loss accounts and income details for specified financial years were also called for.

After hearing the parties on 26.04.2018, the Commission noted the following in its order dated 31.08.2018:

  • The allegation of collusive over‑pricing of syringes (higher hospital MRP vs market MRP) was not substantiated.
  • The DG had recorded that Becton Dickinson supplied to Max Patparganj through independent distributors (M/s Shobham Surgical Works and M/s Hindustan Surgicals) and there was no exclusive supply arrangement.
  • Consequently, no contravention of Section 3(3) was made out against either Becton Dickinson or Max Patparganj, and this finding was accepted.

However, the DG had additionally examined whether Max Patparganj was abusing a dominant position in the market for “provision of healthcare services/ facilities by private super-specialty hospitals within a distance of about 12 kms from Max Super Specialty Hospital, Patparganj” and concluded that:

  • The hospital compelled in‑patients to procure syringes and other products only from the in‑house pharmacy,
  • earned substantial margins on such sales,
  • and thus engaged in conduct amounting to “aftermarket abuse” under Section 4(2)(a)(ii).

Finding the aftermarket aspect insufficiently analysed, the Commission ordered a supplementary investigation under Regulation 20(6) of the erstwhile Competition Commission of India (General) Regulations, 2009.

2. Supplementary DG Investigation – 12 Super-Specialty Hospitals

In the supplementary report (confidential version dated 24.12.2021), the DG widened the enquiry beyond Max Patparganj and covered 12 super‑specialty hospitals in Delhi, including various Max hospitals. Five principal issues were framed:

  1. Whether the investigated hospitals are “enterprise” under Section 2(h).
  2. What is the relevant market.
  3. Whether each hospital is dominant in that market.
  4. Whether there is abuse of dominance under Section 4.
  5. Whether individuals are liable under Section 48.

2.1 Enterprise Status

The DG concluded that the hospitals are enterprise within the meaning of Section 2(h) as they:

  • provide medical services,
  • for monetary consideration,
  • on a regular commercial basis.

2.2 Relevant Market Delineation

Key finding:

  • Except St. Stephen’s Hospital, Delhi, the remaining 11 hospitals did not allow in‑patients to buy consumables, medical devices, medicines or medical tests from outside.
  • From an in‑patient’s perspective, each hospital was effectively a closed system for products and services during admission.

Accordingly, the DG defined for each hospital a separate relevant market as:

“market for provision of healthcare services/ facilities for in-patients admitted to the respective private super specialty hospital” in Delhi.

Thus, 12 independent relevant markets were delineated.

2.3 Dominance

Given that each hospital:

  • sets its own policies independently,
  • is not subject to competitive constraints from other hospitals vis‑à‑vis already admitted in‑patients,

the DG held that each of the 12 hospitals was dominant in its own relevant market.

2.4 Alleged Abuse of Dominant Position (2015–2018)

The DG stated that all 12 hospitals had abused their dominance under Section 4 on five broad parameters between 2015 and 2018:

  1. Room Rent: Room charges were higher than nearby 3‑star/4‑star hotels and certain competing hospitals.
  2. Medical Tests: Prices of 13 routine tests were compared with four diagnostic labs (Dr. Lal Path Labs, Goyal MRI, Focus Imaging and House of Diagnostics). For at least one test in each hospital, pricing was higher than at these labs at some point in 2015–2018.
  3. Medical Devices & Procedures:
    • Prices of Bare Metal Stents (BMS), Bioresorbable Vascular Scaffold (BVS)/ Biodegradable Stents, Knee Implants, Hip Implants and related procedures were analysed.
    • The DG noted an increasing trend in prices from 2015–2018, including for X-ray, MRI and Ultrasound when compared with certain diagnostic centres.
  4. Consumables: Procurement prices vs selling prices were analysed for 20 selected consumables and 20 top‑selling consumables (by volume and value) for each hospital. Significant margins were recorded.
  5. Medicines: A similar procurement vs sale price comparison was done for 19 specific medicines and 20 highest‑selling medicines, again indicating substantial margins.

2.5 Liability under Section 48

For each entity, certain individuals holding managerial and decision‑making responsibilities were named as liable under Section 48.

3. From Composite Case to 12 Sub‑Cases

Subsequently:

  • Becton Dickinson was removed from the array of opposite parties, as no contravention was found against it.
  • The 11 other hospitals were impleaded as opposite parties in Case No. 77 of 2015 alongside Max Patparganj.

Recognising that investigations for each hospital were self‑contained, the Commission:

  • Directed the DG to prepare 12 separate non‑confidential reports and corresponding public versions, each redacting information of other hospitals,
  • Clarified that the matter would effectively proceed as 12 independent sub‑cases, with separate hearings.

Later, because of multiple confidentiality and access requests, and under amended Regulation 35, the Commission, by order dated 24.04.2024, required the DG to file:

  • 12 unredacted supplementary reports, each complete vis‑à‑vis the concerned hospital,
  • along with public versions,
    again reiterating that the matter would be treated as 12 sub‑cases.